5 Ways Retailers Are Redefining Brand Loyalty

Nurturing the digitally-focused retail customer is becoming increasingly challenging, spurring many major retailers to invest heavily in the evolution of traditional brand loyalty programmes.

From unique experiences, to subscription models, to personalised offers, retailers are skilfully leveraging data to venture beyond the widely used points-based rewards programmes.

Overall, the brand loyalty programme market has strong fundamentals: it’s currently valued at over US$186 billion and estimated to grow at a Compound Annual Grown Rate (CAGR) of 5-6%. North America is the largest market (US$73 billion), followed by Europe (US$38 billion) and Asia Pacific (US$ 23 billion).

At the heart of customer loyalty programmes lie cost savings: research1 shows a second-time customer is at least six times more likely to make a repeat purchase than a first-time customer. Additionally, a 5% increase in customer loyalty can boost average profit per customer by at least 25%. (cite)

Here’s a look at some impressive ways retailers are rethinking customer loyalty.

  • Subscription-based membership programmes

    To counter Amazon’s rapid growth, major retailers have shifted away from points-based programmes to paid subscription-based memberships.

    Walmart’s plus programme, which costs US$99 a year, has already been a massive success, clocking over 32 million users in less than a year after its launch. Walmart+ offers both in-store and online benefits for customers including unlimited free grocery deliveries, a scan-and-go app and fuel discounts.

    In 2020, Walmart’s Plus and Sam’s Club programmes accounted for US$1.7 billion in revenues, up by 13% from the previous year and had a renewal rate of 90%. In January 2021, Walmart+ members accounted for about 13‒14% of all Walmart.com shoppers.

    Members of Amazon Prime, which costs about $119 per year, reportedly spend, on an average, about $1,400 annually, which is more than double2 of the comparable spend from non-Prime members. About two-thirds of those who sign up for a Prime free trial convert to a paid subscription, with 93% of signed members continuing as paid members even after the expiration of the subscription period of one year.

    Amazon Prime has also added new features including Prime Gaming, which gives members access to free games, exclusive prizes and a complementary subscription to Twitch.tv.

  • Loyalty goes omnichannel

    It’s no longer enough to have a loyalty programme. It’s increasingly vital that these programmes integrate all the touchpoints where the customer is likely to interact with the brand.

    Studies show that businesses with omnichannel strategy have a 90% higher client retention rate compared to businesses that don’t3. Marketers who adopt an omnichannel approach report a 250% higher rate of engagement than those who adopt a single channel.

    Successful loyalty programmes, such as those of Amazon and Walmart, still entail combining exceptional quality, convenience, customer service and the overall shopping experience – working in tandem across stores, offline and online channels and devices.

    Central to that effort is customer data, which can ensure seamless online and offline shopping experiences.

    “Digital customers don’t think of channels or devices or stores, for that matter. They think of brands. The technology or the physical part of this shouldn’t be the focus of the journey – it’s really the experience,” Bobby Koscheski, Director at ACI, a digital payments company, has said.4

  • Creating a loyalty ecosystem

    The traditional model of redeeming accumulated points with a single brand is losing its sheen with millennials and Gen Z, who tend to prefer instant gratification. Instead, a network of partnerships in the form of a loyalty ecosystem is attracting more interest.

    For example, Germany-based Payback, one of the largest multi-brand loyalty programmes, now has more than 600 partners and has rapidly expanded to other countries, including India.

    In Canada, PointsPay, which has more than 18 million members, allows customers to earn points at over 4,500 locations and rewards its customers for not spending on groceries, fuel, pharmacy, among other retail touchpoints. It has partnerships with Shoppers Drug Mart, Loblaws, PharmaPrix, Esso and Mobil, among others.

  • Rise of Blockchain and tier-based loyalty

    In 2018, Singapore Airlines launched ‘KrisPay,’ a blockchain-based digital wallet that would allow fliers to exchange their air miles with digital currency. The blockchain tokens can be used as part of its loyalty programme, ensuring the accumulated rewards don’t lose their worth over time.

    The airlines found the programme helped keep the consumer enthusiasm intact and facilitated a seamless interchange between miles and points to discounts at restaurants. Since its launch, KrisPay has grown to a network of more than 150 partners and covers 650 outlets.

    Several other loyalty programmes are experimenting with a tier-based model, with varying levels of benefits for each tier. For example, the most exclusive privileges are reserved for members of high-tiers, and the lowest tiers offer gamified rewards such as lotteries.

  • Personalisation Drives ‘Experiential Loyalty’

    Personalised experiences, based on customers’ past behaviour, is another way in which retailers are attempting to stay relevant. Research shows that 76% of consumers ranked personalised discounts based on past purchase history as important and were three times more likely to engage with a brand based on a personal discount.

    In China, for example, WeChat users are shown different offers based on their social media profiles and past activity.

    In 2018, Walmart undertook a redesign of its website to launch more personalisation and relevant product recommendations for its customers.

    “All of us need to be students of the consumer…We need to be quick; we need to be decisive; we need to be agile…The days of mass communication and mass marketing are behind us. Today is about personalisation,” Brian Cornell, CEO of Target has said.5

1Loyalty is the foundation of customer retention, Marketing, September 22, 2001
2Walmart+ Is Already a Massive Success, The Motley Fool, February 26, 2021
3Survey: Businesses that Use Omni-channel Strategies Have Far Better Customer Retention Rates, Loyalty 360
4ACI: Today’s Consumers Expect Grocers To Bring The Brand To Them, pymnts.com, July 28, 2021
5Target CEO Brian Cornell Discusses Personalization, WWD

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